CFPB Rescinds Special Regulatory Treatment for Payactiv
Termination Follows Request by Company in Order to Change its Product
The Consumer Financial Protection Bureau (CFPB) issued an order today terminating Payactiv’s Sandbox Approval Order relating to its earned wage access products. The CFPB had given Payactiv special regulatory treatment, including as to liability under a relevant federal consumer financial law with respect to these products. Payactiv requested the termination in order to make changes to its fee model.
Payactiv, Inc. is a San Jose-based financial services company that provides so-called “earned wage access” products to employees. Payactiv contracts with employers to provide employee-requested transfers of wages that an employee has already earned prior to payday. Payactiv then recoups the amount of each transaction through a payroll deduction from the employee’s next paycheck.
The CFPB granted Payactiv a Sandbox Approval Order in December 2020, which gave the company a temporary safe harbor from liability under the Truth in Lending Act and Regulation Z. The temporary safe harbor is for offering and providing certain earned wage access products, subject to good faith compliance with the terms of the approval order.
The CFPB informed Payactiv on June 3, 2022, that it was considering terminating the approval order in light of certain public statements the company made wrongly suggesting a CFPB endorsement of its products. On June 21, 2022, Payactiv notified the CFPB that it was planning to modify its earned wage access product fee model. The 2020 approval order only applies to the company’s existing products and any changes to the product fee model would require modification to the order. Payactiv instead requested termination of the order so it could make fee model changes quickly and flexibly.
The CFPB has received requests for clarification regarding its advisory opinion on “earned wage access” products. The CFPB plans to issue further guidance soon to provide greater clarity concerning the application of the definition of “credit” under the Truth in Lending Act and Regulation Z.
As requested by Payactiv, today’s order terminates the 2020 Sandbox Approval Order, effective immediately.
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit consumerfinance.gov.